Spanish oil firm Repsol will stop looking for oil in Cuba after hitting a dry well drilled at a cost of more than USD 100 million, it said in a statement on Tuesday.
Speaking to investors and reporters about the firm's plans over the next four years, Repsol Chairman Antonio Brufau said the company "won't do another" well in Cuba, the Associated Press reported.
"The well we drilled turned out dry and it's almost certain that we won't do any more activity there," Brufau added.
Cuba's last chance for hitting oil in the near future could come from Malaysian state oil company Petroliam Nasional Berhad (Petronas), which started drilling last week in an area of the Florida Straits known as the Northbelt Trust, about 110 miles (180 kilometers) southwest of Repsol's drill site. Results are expected in July.
Experts say it is not surprising that Repsol's 3 mile (4.8km) deep exploratory well was a bust. Four out of five such wells find nothing in the high-stakes oil game, and petroleum companies are built to handle the losses.
The Scarabeo-9 platform that Repsol used is the only one in the world that can drill in Cuban waters without incurring sanctions under the U.S. economic embargo, but it is scheduled to head to Brazil after being used for one to four more exploratory Cuban wells.
A delay in finding oil would hurt Cuba because 80-year-old President Raul Castro is trying to lift the country's economy through limited free-market reforms, and has been forced to cut many of the subsidies islanders got in return for salaries of just USD 20 a month.
It could also make Cuba more dependent on Venezuela, which provides USD 3 billion of subsidized oil each year. Venezuelan leader Hugo Chavez is suffering from cancer, and the deal might disappear if he dies or doesn't win re-election in October.
Industry experts have said Repsol YPF SA was under contract to drill a second Cuban well but could get out of the deal by paying a penalty to an Italian company that owns the drilling platform used for Repsol's well.
Brufau didn't mention the penalty, and Repsol spokesman Kristian Rix said he could not immediately provide details on how the arrangement would work.
The Scarabeo-9 was built in Asia with less than 10 per cent US-made parts to avoid violating Washington's embargo.
Because of the embargo, Cuba is shut off from borrowing from international lending institutions. An oil find could change the situation, with Cuba using future oil riches as collateral to secure new financing, economists say.